All Forum Posts by: Wes Blackwell

@Jackson Carr

Here are some comps pulled off the MLS, all sold within the last year:

2131 Jefferson St,Napa, CA 94559
Listing #21626154
Sold for $825,000
6 Units
Gross Scheduled Income: $58,500
Gross Annual Yield: 7.09%
Days on Market: 9

492 Randolph St,Napa, CA 94559
Listing #21514768
Sold for $1,300,000
7 Units
No Income Data on MLS (but agent might know)
Days on Market: 303

1625 Silverado Trl,Napa, CA 94559
Listing #21528924
Sold for $1,600,000
5 Units
Gross Scheduled Income: $97,043.81
Gross Annual Yield: 6.07%
Days on Market: 111

196-Redwood & 2208 Carol Dr,Napa, CA 94558
Listing #21606790
Sold for $2,532,500
9 Units
Gross Scheduled Income: $143,520
Gross Annual Yield: 5.67%
Days on Market: 26

If you're off on the ARV by 6.67%, there goes your $120k in profit. And as you already stated it's completely feasible that it could get slurped up by some unforseen repair or permit expense.

Plus, look at how some of those properties above sat on the market for over 3 months, some as long nearly a year! That could increase your holding costs and eat into that profit as well.

An old investor I used to work with would say "the juice ain't worth the squeeze" and for $120k you might as well do some much less risk SFR flips that have a much bigger pool of buyers and will easily sell in a month or less. Too much risk, too many unknowns, too little profit.

Hi @Andrew Smith! Great question!

Yes, it can potentially take a few months before your first transaction is complete and you will get paid a commission. Even if you find a client immediately, escrow can often be 30-60 days before closing, so you'll need some funds set aside to wait it out or another source of income like a second job. The more flexible, the better. 

The first to come to mind are waiting tables, bartending, and driving for Uber of Lyft. Make sure to tell every single person you wait on or drive somewhere that you're an agent, as this is a talk-to-people business, and if you make it your goal to shake hands with 10 people per day and tell them you're an agent you'll quickly find your first client.

As for me, I already had experience in real estate as a flipper, and had already run a business before and was well-versed in sales. So I joined my brokerage with a empty pipeline and 4 days later had my first two clients from completely cold leads. But that won't be the typical experience... yet, it's really all about hustle and anything is possible.

If you tell us what area you're moving to, you might find a mentor or another successful agent who has a team you can join. In exchange for part of your commission, they can show you the ropes and provide you with leads to work. This may help shortcut your path to success. Best of luck!

Hi @Revathi Neelam! Welcome to Bigger Pockets!

The first thing you'll want to consider is how you can get involved in real estate investing NOW. Maybe you need to read a few books and articles to educate yourself about the different strategies available... Maybe you already have some money set aside and would like to start investing... then you have to decide if you want to focus on fix and flip or buy and hold. This will get your mind moving and you'll automatically start projecting out into the future as you brain storm.

Once you know the first step, then you can set goals for the second step. Essentially you just want to set something high enough to challenge yourself, but not completely out of reach.

Here are some examples:

1. Flip two properties my first year as an investor.
2. Buy 3 rental properties in the next five years.
3. House hack a fourplex for the next two years, and then move out and rent it.
4. Be able to leave my job and invest full time by age 45.
5. Have $500 per month in passive income by 2020.

Simple, small, readily achievable goals that your can put your mind to. After the first step of figuring out what direction you want to take, you'll quickly narrow down more specifics and can start adding in things like price ranges, profit margins, etc. But for now just keep it simple.

Then you can just add on and extrapolate from there... 50 flips in the next 10 years, own 25 rental properties, etc. But that tends to overwhelm beginners has their not even sure where to get started, let alone become the next real estate mogul.

Think of it like this... if you've ever driven somewhere at night, you know the destination and general direction you're heading, but you can only see as far as the headlights. There could be an accident ahead, a detour, or possibly even a shortcut that makes itself known to you. So just take it one turn at a time, and surely one day you'll get there. Best of luck!

@Meredith L.

Here is the order of financing preference from a seller's perspective. And if not from the seller's perspective then certainly the listing agent's. Here's how I would explain each financing option to my seller as their agent:

1. Cash -- Cash is king. An all-cash offer means the offer is not contingent upon the buyer getting a loan, and often times not contingent upon an appraisal, so the buyer can easily pay above appraisal value in a competitive market. It also usually means we'll have a quicker escrow and a faster close. And when it comes down to it, that's what seller's want... a faster sale at a higher price. This offer will almost always win by default.
2. Conventional -- 2nd best option. Just like @Russell Brazil stated above, a conventional loan usually indicates that the buyer is more qualified than an FHA buyer, and so the loan is more likely to close. If a conventional offer and a FHA offer have the same terms, I would recommend that the seller choose the conventional offer simply because it has a higher chance of closing and going all the way through escrow.
3. FHA or VA -- Least preferred, and sometimes even wrongly looked down upon. I once had a FHA buyer with a 6-month old baby come to my open house who had been trying to get offers accepted since before the baby was born! But they were in the ultra-competitive sub-$200k price range so their story isn't typical. But, they made an offer on my listing, and got beat by someone with all-cash. Sooooo there you have it lol.

Besides the type of financing, another important thing sellers consider is the Offer Price. That's what it all comes down to after all. A higher offer price can even help an FHA or Conventional offer beat an all-cash offer. At that point If I were the listing agent I would explain to the seller that it's possible they may receive more money if the offer contingent upon a loan goes through, but that it's more of a sure thing if they accept the offer that is all-cash. The possibility of a little more vs. the certainty of a little less.

After the type of financing and offer price, the next most important thing is the Down Payment. A higher down payment usually indicates that the buyer is better able to qualify for a loan and close the transaction, and it also means that offer is less likely to fall out because of a low appraisal. As you can see It's really all about what offer has the highest chances of going through. If I advise my seller to accept your offer and you are unable to perform, we have to go back on the market again and may have possibly lost another buyer who would've closed.

Lastly, it's the Other Terms like who pays the transfer tax, who pays the escrow fee, who's paying for a home warranty, etc. These are usually small ticket items and highly negotiable so they don't influence which offer gets accepted that much.

As far as writing a letter, honestly it's not worth it. It's all about financing and purchase price. I've seen clients try it all and it really doesn't make a difference if someone else offers a couple thousand more than you do. 

I had one client discover who the seller was on Facebook, and they saw that they were really into church and religion. So my client decided to write some hokey letter pretending to be really into Jesus and said they had been praying for the perfect home and God would finally answer their prayers if the sellers accepted their offer...

Did it work? LOL HELL NO

Usually it just ends up with the buyer feeling super butt-hurt and rejected since they put all the additional effort into writing a letter and trying to make it personal, when for the seller it's all about the money.

@Sean Smith

Your investor friend is correct. Sacramento is currently the #1 rental growth market in the nation, with 10% year-on-year growth. Next year we're projected to have 8.5% growth as well, so rents just keep going up and it's better to be able to quickly capitalize on the increase in demand.

And a big part of the reason is the influx of Bay Area millennials to Sacramento. In just the past month, I've met a handful of clients who match that exact demographic: young professionals who are ready to get their piece of the American Dream, but see how much a piece of crap 1950's tract-home is going to cost them in the Bay Area, and think to themselves "you've got to be kidding." So they're coming to Sacramento in droves.

Midtown and Downtown will see the biggest surges due to their proximity to the main culture-hub and nightlife we have to offer, and East Sac, Arden Arcade and Rosemont will increase due to their proximity to Sac State.

Next will be Oak Park, as the northern part is already gentrified, and raising rents will push those who can't afford it into south sac and north sac / del paso heights. In fact, Del Paso heights might even get worse if the thugs and riff-raff are pushed into the area as the last affordable place to live.

Hi @Donny Yoon! Welcome to Bigger Pockets!

Perhaps I can help guide you in the right direction or get you in touch with the right people... What kind of help do you need in the Sacramento area? Sourcing deals? Connecting with other wholesalers and investors? Local workers for rehab work? And what kind of properties are you looking for out here? Let us know and we'll be able to help you better :-)

@Diane G.

Based off our previous conversation in another post, I think it might help if you widen your criteria or be more open to what areas you're looking to invest in. When I suggested Sacramento as an alternative to Tahoe in another thread, you said it wouldn't work because your coworker bought a few foreclosures here several years and had to do some evictions after owning them, which happens to all investors every where no matter the market. 

Just because she had a bad experience doesn't mean you will... maybe she was just a bad landlord who didn't screen her tenants heavily enough or had a stroke of bad luck with her first couple properties.

If you cherry-pick the best 50 properties in the Central Valley you can get an average gross annual yield of over 10%. Our rents here are set to increase 10% this year, and 8.5% next year. And we're going to have 7.2% appreciation. 

I can find you a completely remodeled fourplex for only $350k with gross rents of easily $3,200 per month, and in two years it will be worth roughly $400k and have rents of $3,800+. And 25% down was only $88k, not two or three times that like you'd pay in the Bay Area. 

Like @Account Closed said, buying cheaper properties will make you a profit. I have another investor looking at a couple properties in Modesto that will have gross annual yields of nearly 12%. And both properties cost less than $200k. Perhaps buying a few of those to work your way up to $1 million in total value instead of a single million dollar property is the way to go.

And even if Sacramento and Modesto are simply places you'll never invest in because of your friend's experience, there's got to be at least a dozen other places like that all over the US that offer you the opportunity. 

Remember that the market dictates everything else, and if the "buy an expensive property in the Bay Area and wait for appreciation and increased rents to make money" no longer works, you'll have to adjust your strategy. I hope this perspective helps, because I know plenty of people making money in today's market with buy and hold. Best of luck!

@Gary Baker

The comment you made about the properties not appearing on the MLS doesn't sound right... they must be listed on the actual MLS. Zillow, Trulia, and even Realtor.com can't hold a candle to the actual MLS search engine that covers the region you are in. 

Not sure if this link will work, but try this:

http://innovia.ntreis.net/ntr/idx/index.php?prop=mlt&key=c0479b399fc51961e34daa7dbc749fc9

If that doesn't work, simply go to http://www.gfwar.org/ and click the red "Find a Home" button shown in the picture below. Then simply select "Multi-Family" from the top and perform your search. Ta-daa!

Usually every single MLS provider will have a website where you can access the MLS and perform searches similar to the way an agent would. You still won't get nearly as much information, but it tends to be better for investors than Zillow, Trulia, etc.

Hope that helps! Best of luck!

@Christian Atendido

The San Francisco / Bay Area market is real tough because of the super high prices. For most beginning investors, I HIGHLY recommend looking into Sacramento and the Central Valley (Stockton, Modesto, Fresno). I've worked with a lot of investors from your area who are happy with the lower prices and great returns, and the added fact that it's only an hour or two away.

I've written more about the market in these two posts here:

• https://www.biggerpockets.com/forums/621/topics/396725-millennial-migration-to-sacramento-2017---here-comes-the-rush
• https://www.biggerpockets.com/forums/55/topics/396376-looking-to-get-unstuck-in-the-sf-bay-area

You can expect an average purchase price of around $350k which means only $88k for 25% down. Gross monthly rents are around $2,100 on average, but can easily stretch into the $3-4k mark. For gross annual yields (gross annual rents divided by purchase price) you can expect 7-8% on average, but the better performers will be in the 10%+ range, of which there are plenty!

@Peter Yang

Here's a couple posts I've written about the Sacramento area and the potential opportunity. Feel free to reach out if you have any questions or want to know what kind of properties are currently available. Best of luck no matter which area you go with! :-)

• https://www.biggerpockets.com/forums/621/topics/396725-millennial-migration-to-sacramento-2017---here-comes-the-rush
• https://www.biggerpockets.com/forums/55/topics/396376-looking-to-get-unstuck-in-the-sf-bay-area